Abolition of Employer National Insurance Contributions for under 21s
25 August 2014
HMRC have issued further information and examples about the Abolition of Employer National Insurance Contributions for under 21s which will apply from 6th April 2015.
HMRC report that:
We have engaged with employers, agents and payroll providers informally at various workshops and forums this year. The feedback we have received so far suggests:–
· Employers want validation: the age of an employee must match the appropriate category letter and where it does not the software should flag this issue prior to submission
· If possible an automated solution is favoured, with NI category letters changing to the new appropriate letter automatically for existing employees under 21 when the measure is introduced. Alternatively, the software should prompt the user to change to the new appropriate NI category letter
· Category letters should change to the appropriate NI category letter automatically when an employee reaches the age of 21 or the software should prompt the user to change to the appropriate NI category letter
These are the new NI Category Letters
M - Not contracted-out standard rate contributions for under 21
Z - Not contracted-out deferred rate contributions for under 21
Y - Mariners not contracted-out standard rate contributions for under 21
P - Mariners not contracted-out deferred rate contributions for under 21
V - Mariners Contracted-out Salary Related contributions for under 21
I - Contracted-out Salary Related standard rate contributions for under 21
K - Contracted-out Salary Related deferred rate contributions for 21
The 3 new letters relating to ‘Contracted-out’ schemes will be removed after ‘year one’ in line with the removal of all contracted out letters, linked to the New State Pension which will be introduced in April 2016.
HMR say that the purpose of the new examples is to provide an overview of how the calculations will work: and we have illustrated the most common Director examples and at the same time included further examples on how to deal with certain situations in the payroll following developer feedback.